1983 (12) TMI 6 - HC - Wealth-tax

Issues Involved: Liability for penalties under section 18(1)(a) of the Wealth-tax Act for assessment years 1958-59, 1959-60, 1960-61, and 1961-62; Necessity of obtaining previous approval of the Inspecting Assistant Commissioner of Wealth-tax for levying penalties after the amendment of section 18(1)(a) by Act No. 46 of 1964.

Issue 1: Liability for Penalties under Section 18(1)(a) of the Wealth-tax Act

The assessee failed to file wealth returns for the years 1958-59, 1959-60, 1960-61, and 1961-62 by the due dates. Notices under section 17 of the Act were served, and the returns were eventually filed with delays ranging from seven to eight months. The Wealth-tax Officer (WTO) imposed penalties for these delays, which were upheld by the Appellate Assistant Commissioner (AAC). The assessee appealed to the Income-tax Appellate Tribunal (the Tribunal), arguing that there was a reasonable cause for the delays and that penalties were imposed without obtaining the necessary approval from the Inspecting Assistant Commissioner (IAC). The Tribunal's members were divided on whether there was a reasonable cause for the delays but agreed that the procedural requirements for imposing penalties were not clear after the amendment of section 18(1)(a) by Act No. 46 of 1964.

Issue 2: Necessity of Previous Approval of the Inspecting Assistant Commissioner

The Tribunal held that the provisions of section 18(1)(a) before the amendment by Act No. 46 of 1964 applied to the assessee's case because the defaults occurred before the amendment. The Tribunal gave the benefit of the doubt to the assessee regarding the necessity of obtaining the IAC's approval for imposing penalties. The Commissioner of Wealth-tax sought a reference to the High Court on whether this interpretation was correct.

Analysis and Judgment:

Procedural Requirements Post-Amendment:

The High Court analyzed whether the amended section 18(1)(a) applied retrospectively. The amendment removed the requirement for the WTO to obtain the IAC's approval before imposing penalties. The High Court concluded that procedural amendments generally apply retrospectively unless explicitly stated otherwise. Thus, the amended procedural requirements of section 18(1)(a) applied to penalty proceedings initiated after the amendment came into force, even if the defaults occurred earlier.

Reasonable Cause for Delays:

The High Court noted the difference of opinion between the Tribunal members on whether the assessee had a reasonable cause for not filing returns on time. The accountant member believed there was a reasonable cause, while the judicial member disagreed. The High Court emphasized that in cases of such disagreement, the matter should be referred to the President of the Tribunal or a third member for a final decision.

Conclusion:

The High Court held that the Tribunal was incorrect in giving the benefit of doubt to the assessee regarding the necessity of the IAC's approval after the amendment. The procedural requirements of the amended section 18(1)(a) applied retrospectively. However, the computation of penalties should follow the law as it stood at the time of the default. The High Court directed the Tribunal to refer the issue of reasonable cause for the delays to the President of the Tribunal for a final decision.

Summary:

1. The High Court determined that the procedural requirements of the amended section 18(1)(a) of the Wealth-tax Act apply retrospectively.
2. The necessity of obtaining the IAC's approval for imposing penalties was not required after the amendment.
3. The Tribunal must refer the issue of reasonable cause for the delays in filing returns to the President of the Tribunal for a final decision.

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